# C_2014126EN.01003501.xml

| 26.4.2014 | EN | Official Journal of the European Union | C 126/35 |
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26.4.2014

EN

Official Journal of the European Union

C 126/35

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Opinion of the Committee of the Regions — EU guidelines on state aid for rescuing and restructuring firms in difficulty

2014/C 126/09

I.   POLICY RECOMMENDATIONS

POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS,

General comments

General comments

| 1. | welcomes the fact that the European Commission has now launched a consultation on the review of the guidelines on state aid for rescuing and restructuring firms in difficulty, which is open to all stakeholders and sets out a number of options. Regrets, however, that the CoR has not been formally consulted and that the time frame for this consultation is so tight, limited in practice to only six weeks; |
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1.

welcomes the fact that the European Commission has now launched a consultation on the review of the guidelines on state aid for rescuing and restructuring firms in difficulty, which is open to all stakeholders and sets out a number of options. Regrets, however, that the CoR has not been formally consulted and that the time frame for this consultation is so tight, limited in practice to only six weeks;

| 2. | welcomes the detailed written response from the Competition Commissioner dated 7 November 2013, to the previous CoR opinion on state aid for rescuing and restructuring (1) and is pleased to note that a number of the CoR's recommendations have been taken up by the Commission in the new draft guidelines, including:






  i. | the rejection of the idea of limiting the meaning of firms in difficulty to firms that are in formal insolvency proceedings (section 2.2. of the draft guidelines); |
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2.

welcomes the detailed written response from the Competition Commissioner dated 7 November 2013, to the previous CoR opinion on state aid for rescuing and restructuring (1) and is pleased to note that a number of the CoR's recommendations have been taken up by the Commission in the new draft guidelines, including:

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i.

the rejection of the idea of limiting the meaning of firms in difficulty to firms that are in formal insolvency proceedings (section 2.2. of the draft guidelines);

| ii. | putting more focus on behavioural measures such as bans on expenditure for expansion and acquisition and on advertising and the payment of dividends (points 86-88 of the draft guidelines); |
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ii.

putting more focus on behavioural measures such as bans on expenditure for expansion and acquisition and on advertising and the payment of dividends (points 86-88 of the draft guidelines);

| iii. | stepping up requirements regarding transparency by obliging Member States to publish on-line all of the relevant information on aid granted (point 101 of the draft guidelines); |
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iii.

stepping up requirements regarding transparency by obliging Member States to publish on-line all of the relevant information on aid granted (point 101 of the draft guidelines);

| iv. | clarification regarding the interaction between the mechanism for state aid for rescuing and restructuring firms in difficulty and state aid for services of general economic interest (SGEIs) and in particular the clarification that ‘when determining the burden sharing (...) the Commission will disregard any public service compensation that meets the compatibility requirements of the SGEI Framework’ (point 106); |
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iv.

clarification regarding the interaction between the mechanism for state aid for rescuing and restructuring firms in difficulty and state aid for services of general economic interest (SGEIs) and in particular the clarification that ‘when determining the burden sharing (...) the Commission will disregard any public service compensation that meets the compatibility requirements of the SGEI Framework’ (point 106);

| 3. | reiterates its conviction that the process of modernising the state aid mechanism should focus on prohibiting aid likely to have a real and notable impact on the internal market and should reduce the bureaucratic burden for the actors concerned; |
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3.

reiterates its conviction that the process of modernising the state aid mechanism should focus on prohibiting aid likely to have a real and notable impact on the internal market and should reduce the bureaucratic burden for the actors concerned;

| 4. | welcomes the confirmation that the Commission has abandoned the goal of a quantitative, undifferentiated reduction in state aid, but feels that the draft guidelines insufficiently back up the assertion that ‘the revision also takes into account the Europe 2020 strategy’ (point 5 of the draft guidelines); |
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4.

welcomes the confirmation that the Commission has abandoned the goal of a quantitative, undifferentiated reduction in state aid, but feels that the draft guidelines insufficiently back up the assertion that ‘the revision also takes into account the Europe 2020 strategy’ (point 5 of the draft guidelines);

| 5. | welcomes the proposed introduction of the concept of ‘temporary restructuring support’. Calls for its maximum duration to be set at 18 months so as to prevent such support not covering a full financial year; |
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5.

welcomes the proposed introduction of the concept of ‘temporary restructuring support’. Calls for its maximum duration to be set at 18 months so as to prevent such support not covering a full financial year;

| 6. | endorses the Commission's proposed non-exhaustive list of situations of social hardship or market failure that justify aid as being in the public interest, including an unemployment rate in the region concerned that is higher than the EU average or the national average and the risk of interruption to the continuity of provision of an SGEI (point 45 of the draft guidelines). Calls on the Commission to specify the relevant territorial level for statistical purposes for measuring such failures; |
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6.

endorses the Commission's proposed non-exhaustive list of situations of social hardship or market failure that justify aid as being in the public interest, including an unemployment rate in the region concerned that is higher than the EU average or the national average and the risk of interruption to the continuity of provision of an SGEI (point 45 of the draft guidelines). Calls on the Commission to specify the relevant territorial level for statistical purposes for measuring such failures;

| 7. | regrets the bald assertion that ‘state aid for rescuing and restructuring steel undertakings in difficulty is not justified’ because of the ‘present conditions of significant European and global overcapacity’ (point 15 of the draft guidelines). This analysis seems purely quantitative and short term in nature, whereas the strengths of the European steel industry lie in a shift towards high-quality, more specialised production. It should also take into account the estimates in the study by the Organisation for Economic Cooperation and Development (OECD), according to which demand for steel will increase from 1,4 billion tonnes in 2013 to 2,3 billion tonnes in 2025. The Commission's analysis also seems to contradict the Steel action plan (2), which suggests that steel firms may benefit from public support under the state aid rules. Therefore proposes that specific guidelines be drawn up for the steel industry; |
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7.

regrets the bald assertion that ‘state aid for rescuing and restructuring steel undertakings in difficulty is not justified’ because of the ‘present conditions of significant European and global overcapacity’ (point 15 of the draft guidelines). This analysis seems purely quantitative and short term in nature, whereas the strengths of the European steel industry lie in a shift towards high-quality, more specialised production. It should also take into account the estimates in the study by the Organisation for Economic Cooperation and Development (OECD), according to which demand for steel will increase from 1,4 billion tonnes in 2013 to 2,3 billion tonnes in 2025. The Commission's analysis also seems to contradict the Steel action plan (2), which suggests that steel firms may benefit from public support under the state aid rules. Therefore proposes that specific guidelines be drawn up for the steel industry;

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| 8. | as regards burden sharing, is in favour of option 1, which proposes a more flexible approach whereby the contribution by shareholders and creditors is to be determined in relation to the likely losses that they would have suffered in the event of insolvency (section 3.5.2). Reiterates its call, however, for the threshold for the firm's own contribution to be set below 50%, as is already the case for medium-sized companies under the current system; |
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8.

as regards burden sharing, is in favour of option 1, which proposes a more flexible approach whereby the contribution by shareholders and creditors is to be determined in relation to the likely losses that they would have suffered in the event of insolvency (section 3.5.2). Reiterates its call, however, for the threshold for the firm's own contribution to be set below 50%, as is already the case for medium-sized companies under the current system;

| 9. | restates its proposal that it should be possible to include the shareholdings of the firm's subcontractors or employees when calculating the firm's own contribution insofar as they are clearly separate from any form of aid and demonstrate that the firm's actors have confidence in the viability of their firm; |
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9.

restates its proposal that it should be possible to include the shareholdings of the firm's subcontractors or employees when calculating the firm's own contribution insofar as they are clearly separate from any form of aid and demonstrate that the firm's actors have confidence in the viability of their firm;

| 10. | calls for the period applicable to the ‘one time, last time’ condition to be reduced from ten years to five years as is already the case for primary agricultural producers under the current system. Reducing this time frame would also ensure consistency with the durability of operations clause in Article 57 of the current general regulation on the Structural Funds, which enables the recovery of aid where the investment is not maintained for five years, or three years for SMEs. Reiterates its call for this ‘anti-relocation’ clause provided for in the Structural Funds to be applied to the mechanism for state aid for rescuing and restructuring firms in difficulty; |
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10.

calls for the period applicable to the ‘one time, last time’ condition to be reduced from ten years to five years as is already the case for primary agricultural producers under the current system. Reducing this time frame would also ensure consistency with the durability of operations clause in Article 57 of the current general regulation on the Structural Funds, which enables the recovery of aid where the investment is not maintained for five years, or three years for SMEs. Reiterates its call for this ‘anti-relocation’ clause provided for in the Structural Funds to be applied to the mechanism for state aid for rescuing and restructuring firms in difficulty;

| 11. | in the section on aid to SGEI providers in difficulty, wonders why the Commission does not address the scenario where option 2 is chosen in relation to burden sharing (point 106 of the draft guidelines); |
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11.

in the section on aid to SGEI providers in difficulty, wonders why the Commission does not address the scenario where option 2 is chosen in relation to burden sharing (point 106 of the draft guidelines);

| 12. | deeply regrets the Commission's proposal to lower the maximum amount of aid granted for a scheme to rescue and restructure any one firm, without proper explanation, to EUR 5 million, when it had been set at EUR 10 million in 2007 and the CoR had called for it to be increased to EUR 15 million to take account of inflation and other relevant factors (such as the impact on GDP and on unemployment); |
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12.

deeply regrets the Commission's proposal to lower the maximum amount of aid granted for a scheme to rescue and restructure any one firm, without proper explanation, to EUR 5 million, when it had been set at EUR 10 million in 2007 and the CoR had called for it to be increased to EUR 15 million to take account of inflation and other relevant factors (such as the impact on GDP and on unemployment);

| 13. | calls on the Commission to provide an analysis of the frameworks for state aid for rescuing and restructuring firms in difficulty that exist in other OECD countries. |
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13.

calls on the Commission to provide an analysis of the frameworks for state aid for rescuing and restructuring firms in difficulty that exist in other OECD countries.

Brussels, 30 January 2014

The president of the Committee of the Regions

Ramón Luis VALCÁRCEL SISO

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(1)  Opinion of the Committee of the Regions of 11 April 2013 on EU guidelines on state aid for rescuing and restructuring firms in difficulty (CDR240-2013_AC).

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EU guidelines on state aid for rescuing and restructuring firms in difficulty

(2)  Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Action plan for a competitive and sustainable steel industry in Europe, COM(2013) 407.

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